Here's my Top 10 links from around the Internet at 11 am in association with NZ Mint.
I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
My must read today is #3, which is a provocative view on the growth of open source work and its threat to capitalism.
1. Saving capitalism from itself - Nobel Prize winner Joseph Stiglitz, who we've interviewed on interest.co.nz, is trying to save capitalism from itself.
He compares his views to those of Keynes during the 1930s.
People forget that many democracies faced urgent threats at that time of communism, because of the perceived failure of capitalism.
Now Communism is also seen as a failed option.
But what will be proposed in the place of the Ayn Rand version of hyper-free market capitalism that the world opted for over the last 30 years?
Stiglitz makes some good points in this interview on BusinessLife.
The way I see it is a little bit like the way I see Keynes. He was trying to save capitalism from the capitalists. Had Keynesian economics not succeeded in showing that you could restore near-full employment, the attacks on capitalism would have been virulent. Had the so-called “capitalists” had their way and engaged in budget cutting, there would be no capitalism. I guess I feel a little bit the same way…
I view the market as an instrument. I think it’s a very powerful, effective instrument, but it can be used for good or evil. It has to be shaped to be used for the positive, and the shaping is a political process. I think the anti-capitalists who are seeing the adverse effects typically don’t have an alternative instrument. All they see is that capitalism as it is being used leads to outcomes that they find unacceptable. To some extent I agree with them, but I don’t blame the tool. You can use a hammer to kill somebody, but it’s still a hammer that can be used to build a house. You don’t destroy the instrument, you ensure it’s used the right way.
2. Will capitalism survive value abundance? - Al Jazeera that Open-source software, shared innovation and crowd-sourced manufacturing threaten capitalism as we know it.
Well worth a read. Not sure I agree, but it opened my eyes to the 'free' economy.
Where there is no tension between supply and demand, there can be no market and no capital accumulation. What peer producers are doing, for now mostly producing intangible entities such as knowledge, software and design, is to create an abundance of easily reproduced information and actionable knowledge.
This cannot be directly translated into market value, because it is not at all scarce - it's over-abundant. And this activity, moreover, is done by knowledge workers, whose ranks are steadily expanding. This over-supply threatens to make knowledge workers' jobs precarious. Hence, an increased exodus of productive capacities, in the form of direct use value production, outside the existing system of monetisation, which only operates at its margins. In the past, whenever such an exodus occurred - of slaves in the decaying Roman Empire, or of serfs in the waning Middle Ages - that is precisely the time when conditions were set for major societal and economic changes.
Indeed, without a core reliance on capital, commodities and labour, it is hard to imagine a continuation of the capitalist system.
Here's Felix:
I would never encourage speculating on the art market: it’s a rigged game, which you’re almost certain to lose. But if you really want to do it, here’s a tip: buy work which (a) is instantly recognizable as coming from the artist in question; (b) looks great when hung on the wall of an expensive apartment, and (c) comes from a fecund artist with a massive output. Oh, and if you can, get a painting with lots of red in it.
And remember, you’re not buying great art, or art you particularly love. You’re second-guessing, buying the kind of art you hope that billionaires are going to covet in the future. It’s a pretty soul-destroying exercise, with a low probability of success. But if you’re the kind of person who marks your art collection to market, you probably don’t have much of a soul to begin with.
4. 'Everyone knows the Spanish are lying about the figures' - Kiron Sarkar writes at The Big Picture about the pain in Spain.
Spain simply cannot meet its targets – unemployment is currently 23.2% and around 50% for under 25′s and forecast to get even worse. Its economy is imploding, in particular, given its previous reliance (estimated at 25% of GDP) on construction – which will not come back for many, many years.
Whilst I have a great deal of sympathy for Mr Rajoy, in particular given the serious economic and fiscal problems he has inherited from the previous administration (his administration has already agreed to E15bn of additional cuts in expenditure/tax increases and introduced labour reforms, since coming into power at the end of last year), his sense of timing is truly amazing, to say the least.
Unnamed, EU/German officials are less generous. Senior EU/German sources state “Everyone knows that the Spanish are lying about the figures” – a response to the allegation that the current Spanish administration has inflated the 2011 budget deficit, so as to get a more sympathetic hearing on this years increased defict. However, continued austerity without growth is unsustainable – economically, financially and/or politically, irrespective of German views.
5. China's free trade duplicity - Forbes' Gordon Chang reports China's government has issued an edict saying government departments can only buy Chinese brands of cars.
The Chinese central government has decided to take on foreign brands—and especially the luxury models—in a direct manner. At the end of last month, the Ministry of Industry and Information Technology posted a proposed list of brands that state units may purchase. There were 412 of them, none of them foreign. The list is open for public comment until March 9. Foreign-branded cars account for about 70% of the overall Chinese car market and around 80% of government purchases.
The Ministry’s list is just another effort to undermine foreign brands. Late last December, Beijing announced a cut back in approvals for foreign companies to build plants, and we can be sure there will be further restrictions unfairly aiding local manufacturers. In more candid moments, foreign car executives will say they expect a punishing regulatory environment in China in the next few years.
6. Iceland's debt relief - Bloomberg reports Iceland is proving that debt relief for households and defaulting on foreign (bank) debts was the best solution to its crisis.
The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.
The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses.
Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn.
Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.
7. Jamaica wants a Greek-style bailout - Bloomberg reports Jamaica wants some of that Greek bailout magic...
Lord have mercy indeed.
“If they could give a bailout like Greece, lord have mercy, you would see Jamaica grow and flourish,” Prime Minister Portia Simpson Miller, 66, said in an interview yesterday in Montego Bay. “The European countries got together and tried to do something so that they can give some serious aid to Greece. We know we would never be able to get the same level as Greece, but if we could get some consideration from countries or the IMF, we would be on our way.”
8. Where the money went - Economist blogger Miles Corak points to UC Berkeley research showing that in the first year of the US economic recovery the top 1% of income earners accumulated 93% of the income growth during that first year.
“In 2010, average real income per family grew by 2.3% … but the gains were very uneven. Top 1% incomes grew by 11.6%, while bottom 99% incomes grew only by 0.2%. Hence, the top 1% captured 93% of the income gains in the first year of recovery. Such an uneven recovery can help explain the recent public demonstrations against inequality.”
You betcha'
9. What a Greek default means - The Institute of International Finance issued a secret memo warning financiers what a disorderly default and exit from the Euro zone by Greece would mean. The trillion number is mentioned.
It's blood curdling and may make it worthwhile for the powers-that-be to cut a deal with the hold outs on the Greek debt exchange known as PSI. HT Zerohedge.
"It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed €1 trillion."
In other words, hold out at your own peril. Of course, what the IIF does not understand, is that for hedge funds it is precisely this kind of systemic nuisance value that makes holding out that much more valuable, as they understand all too well that they have all the cards on the table. And while a Greek default could be delayed even if full PSI was not attained by Thursday, it would simply make paying off the holdouts the cheapest cost strategy for the IIF, for Europe and for the world's banks.
10. Totally Jon Stewart on America's economic recovery and what it means for Fox News.
117 Comments
Bernard, claiming the world has adopted "hyper free market capitalism" over the past 30 years is so ridiculous it seriously erodes your credibility as a business commentator.
It's hard to even know where to begin debunking this claim - the record amounts of counterfeit capital pumped out by central banks around the world, the continuing expansion of welfare states, massive and rapidly-growing government debt, the ever-increasing regulatory burden on businesses, minimum wage laws that prevent the un-skilled from getting work, the violation of private property rights under the guise of "smart growth" town planning... the list goes on and on.
The idea of "saving capitalism from itself" comes from those who are so arrogant they think they can plan the entire economy on their own and do it better than billions of people acting and thinking for themselves. I often hear people talk about the "excesses of capitalism" but who decides what is "excessive"? Values are subjective, so who are you to interfere in a voluntary, mutual exchange and say "you're doing it wrong"?
Stiglitz claims the market can be "used" for good or evil. However, the only entity with the power to "use" the market is the state, which abuses its monopoly on force to violate people's property rights. Unlike market exchanges, where both parties benefit (unless there is fraud involved), state actions inherently benefit one group at the expense of another.
People also forget that no matter how big they are, companies can't force you to buy their products. Only the state can do that. But don't worry, the state would only do such a thing for your own good, to save you from yourself. Right?
Kleefer
What you're saying is the free market captialism didn't go far enough.
I have a lot of sympathy for those against the state bailouts of banks and who would like to have seen the chips fall where they may.
But the Ayn Rand-led break down of the role of regulation (just look at the financialisation of the economy) was a consistent theme from the early 1980s onwards.
Capitalism blew itself up. As it often does when little restrained. That's why we almost got communism in the 1930s. After 50 years of booms and busts, people got tired and grumpy.
They also got sick of seeing the benefits of technological innovation going to the richest, many of whom loved to skew the playing field of the 'free' markets for their own benefits.
cheers
Bernard
Agree, bailouts are state support for the wealthy and its markets economics for everybody else. The usefulness of market economics depends on the un-proven efficient markets hypothesis as well. There is a pretty severe failure of ethics somewhere there.
Another obvious factor is the shift to low-tax economies. Even if you think low corporate tax is fair, it changes the balance away from corporate re-investment of profits and towards immediate payment of profits. Unfortunately the people making this decision (to pay dividends or re-invest) are usually be best placed to decide where investment should go. While the share market is usually less well placed. I think this frequently leads to short term investment thinking.
Nic, seeing you mentioned the efficient markets hypothesis, it's worth mentioning that the free market Austrian school explicitly rejects the theory (http://mises.org/daily/4904). In the linked piece, titled "Following the Efficient-Markets Hypothesis into Absurdity", Robert Murphy shows how if the theory were true, asset bubbles would be logically impossible.
Good to see they are not totally mad. How would an Austrian economy be different though? As far as I know everything was setup in an Austrian manner prior to 1910, but that era was hardly utopian.
I agree with Rothbard that fractional reserve banking is a real issue which damages the real economy. But the last time there was a gold standard there was not a lot of pressure to do away with the overlying banking system.
Nic, appreciate the comment. Rothbard's A History of Money and Banking in the United States is an excellent book for explaining what caused each of the pre-1913 banking crises (surprise, surprise, governments were interfering in banking well before the Federal Reserve was created).
What exactly is your counter-factual, Bernard? In what way do you think Governments should have been "restraining" capitalism?
I would follow your advice and look at "the financialisation of the economy" but I am afraid I don't understand what you mean by the term; could you explain please.
To start with,
1) not repealing the laws put in place so that the Great Depression was not repeated would seem to have been sensible.
2) Professor Black? summed up the housing and loan debackle and how it applied to today well, CDS's and wholesale fraud etc should have been criminal......
3) Even upholding the few laws not removed would have probably saved us the worst of this...
regards
Ms de Meanour
Many thanks. The Glass-Steagall Act of the 1930s separated investment banks from regular banks. That was relaxed in the late 1990s and is widely credited with the explosion of lending and securitisation. Reimpose that for a start.
The financialisation of the economy refers to the increasing profit share in the global economy now claimed by the financial sector (in part due to the relaxation referred to above)
cheers
Bernard
No Bernard, what I'm saying is that there was nothing even remotely resembling free market capitalism during the period you describe, and if there had been we would all be a lot better off.
The "Ayn Rand-led breakdown of the role of regulation" as you refer to it, never actually happened. Regulations on all forms of business, including the financial sector, have increased dramatically in the last 30 years. I read somewhere that the US now has more than 90,000 pages of regulations!
More state "regulations" will only distort markets and benefit the large companies you seem to have it in for at the expense of the small, innovative businesses you claim to support. Why does Walmart support increasing the US federal minimum wage? So it can drive its lower-cost competitors out of business.
Contrary to your claim, capitalism never "blew itself up", not in 2007 and not in the 1930s. In both instances loose monetary policy by central banks (which by the way, wouldn't exist in a free market) caused huge asset bubbles that resulted in stock market crashes. For details about what happened in the 1930s try the book America's Great Depression by Murray Rothbard, or for those looking for an easier read, The Politically Incorrect Guide to the Great Depression and the New Deal by Robert Murphy.
However, the same thing occurred in 1920 and the recession was in fact more severe than the initial stages of what became the Great Depression. Why don't we hear about the depression of 1921? Because in those pre-Keynesian days governments let the market, particularly wage costs, adjust to the new reality. This included allowing insolvent companies to liquidate so capital could be re-allocated (there were no bailouts and no 'stimulus').
You also claim people "got sick of seeing the benefits of technological innovation going to the richest, many of whom loved to skew the playing field of the 'free' markets for their own benefits." Exactly what technological innovation are we talking about? Cars? Planes? Telephones? TVs, fridges, computers, washing machines? Ipods? Capitalism transformed all these technologies from luxury goods to mass-market goods in years, and sometimes in a few months.
What your comments show is that state propaganda can fool many, even otherwise knowledgeable business reporters.
What "critical laws" are you talking about and how would they have stopped the financial crisis?
I note earlier you said credit default swaps should be illegal, but why? They're just a form of insurance, in this case against default by a particular entity. Blaming the financial crisis on credit default swaps is a bit like blaming the Christchurch earthquakes on insurance companies.
Wonky as per usual.....this isnt the same thing....the point of CDS's is your next door neighbour takes out life insurance on your wife and often you cant afford to and worse sets you up for her "accidental" death and makes a huge profit for no real loss. Or say insurers your house for fire and gives the local hoods $50 to torch it....
Now in some ways there are two parties to this, the one who wants the CDS and the one willing to cover it for a fee....as long as both are on equal ground and have equal knowledge thast fine...but teh point of the un-regulated CDS market is this isnt the case. \
"wonderful insurance money" sums you up I think....I have a wonderful wife...all insurance in the world wouldnt compensate for her loss to me.
regards
I disagree about this Steven. I think that the various 'clever' financial instruments in the US have proven very dubious. There has as a result of this been massive damage to the financial system and the credibility of banks. The collapse of this probably triggered the crisis beginning but I don't think that is to say there wasn't a problem building behind it. Eventually something is going to burst even the most well regulated bubbles. The Australian banking system is relatively clean even traditional by comparison, but their property bubble has to collapse eventually as well as does the same thing in NZ.
On this basis I think that Glass-Stegall could have been ineffective, the inflation of the credit bubble has to do with risk taking behaviour which was not really prevented by this law. These laws were quite watered down versions of what was initially proposed to address the great depression.
Im not so sure we disagree actually...."Financial instruments very dubiou"s....at the very least, but not even that good...absolute criminal fraud is more like it. "Massive damage", yep and actually the worst is still to come. Also not only from the old mess, the financial industry has spent the last 4 years making it worse instead of us putting them in jail......this blow up will look like the Great Depression.
I agree, the OZ banking system clean, yes from fraud but not from over exposure.../ leverage....they/we (ie our banks) are probably toast but not criminally so. About the only bank that might survive this is the TSB....I assume Kiwibank might also, I certianly wouldnt put a cent in the OZ four.
Glass-Stegal is where we will differ. Even if not directly / totally applicable it sets the tone / attitude of how things should be and it and its brethern did so for 50 odd years.
The failings are a) taking out most of what little regulation there was, but just as importantly not stopping criminal behaviour with what was left......which they could have done.....and should have done....but partisan US politics made sure that was impossible,,,,,but equally others (EU, UK etc) around the world should have been alert and not allowed it to spread....they didnt....
regards
Recall that the most profitable business model is a monopoly or cartel protected from competition by the coercive Central State. Imposing complex regulations on small business competitors effectively cripples an entire class competitors, but does so in "stealth mode"--after all, more regulations are a "good thing" (especially to credulous Liberals) which "protect the public" (and every politico loves claiming his/her new raft of regulations will "protect the public.")
http://www.oftwominds.com/blogfeb12/crony-capitalism2-12.html
Kleefer- what his statement shows, along with yours, is that neither of you get what is happening this time.
Lets go back to the basics. Money is a proxy for 'stuff' - it's end game is the buying of goods and services. They - without exception - are produced by the doing of work, which - without exception - requires energy. That process can be made more efficient, but no more than 100%, so it a path of diminishing returns.
So we can safely say that peak energy = peak work = peak home for money. That is what is different from 1 point something billion people in the 1020's. They had growth potential both ahead, and per-head.
Bernard is quite correct, the debt is socialised via collusion - as per selling of State assets here currently, or via bailouts. That's a yin-yang scrap in relative terms, a struggle as old as serfdom, but the wave breaking over the lot is a game-changer. No - repeat no - financial regime-change will/can change things, for the simple reason that finance is not real, in the way land, food and resources are. Quite simply, more money doesn't guarantee more can be purchased, whereas more energy would. Which makes the 'valuing' of energy assets a bit beyond the capabilities of Treasury types.
It's a bit of a laugh, watching the squabbling as the wave curls overhead.
Powerdownkiwi, the assumption underlying your whole comment is flawed: more wealth does not necessarily require more energy. "Wealth" is a subjective term that refers to the satisfaction of wants, and that doesn't necessarily mean bigger, more energy-intensive items.
What the market does is provide people with signals - if there is less of something, including energy, prices will rise and people will use less of it, or substitute it for something else. This is far preferable to the alternative way of rationing scarce goods, which is to have some central planner decide who can have what when.
A good example of why the latter approach fails was New Zealand's use of carless days during the 1970s - why didn't Muldoon just allow the price of petrol to rise to a market-clearing level instead of creating some ridiculous scheme that people inevitably found their way around?
Your smugness is over-powering, However, the track record of you and other Malthusians is woefully poor. When Malthus began writing his essays on the dangers of over-population in 1798 there were about one billion people in the world. Fast-forward more than 200 years and there are seven billion people in the world, and per-capita wealth is the highest it has ever been.
What creates wealth is not energy but rather capital accumulation. Money is not useless as you make it out to be; it not only allows trade between people when one doesn't want what the other one produces (for instance, Bernard Hickey can buy a car even if the seller doesn't read his website), but it also, through the interest rate mechanism, allows for economic activity to be co-ordinated across time. In other words, markets help us to plan for the future.
You talk as if the end of the world is always just around the corner. However, like the 1930s, the current crisis was caused by manipulation of the money supply and government meddling that prevented market adjustment.
Rising oil prices were a symptom of the problem rather than a cause. Oil is cheaper relative to gold than it was 30 years ago, showing that most of the price increase has come from debasement of the currency rather than increased demand or reduced supply.
You may be right that we are at "peak energy" (I do not claim to be an expert on the subject) but whatever 'solution' you dream up would be far more disastrous than just letting people figure things out themselves.
Kleefer - Nup, it's yours is flawed. There is NOOOOOOOOO substitute for energy (and the yelling was on purpose!).
Until you understand that nothing NOOOOOOOOTHING happens without it, you ain't anywhere.
Malthus warning was only staved off by the increasing use of energy - fossil fuels, starting with coal, then oil. We're going back down now, coal will outrank oil in 3 years or so.
This quote I will keep if you don't mind - it sums up the ignorance more succinctly that I've ever seen it:
"if there is less of something, including energy, prices will rise and people will use less of it, or substitute it for something else".
Thank you for that.
What are you gonna substitute for energy? I'm fascinated. Gold? Money? Will they run tractors? Trucks? Ships? Make plastic? Roads? Fertiliser? Run 70% of the USA'S electricity production? 45% of the planets? And with that lot decreasing in real terms (note, not ceasing, that takes longer) you'll underwrite the next doubling with ....what?
Good luck. Me, I'll stick with physics. Last time I stuffed a 100$ bil in my gas-tank, it clogged the idling jet.
Once again you're missing the point. I didn't say we don't need energy, I said that as wealth increases people don't necessarily have to use more of it.
For example, modern cars are much more fuel-efficient than older models. This is a response not only to improvements in technology that allowed it to happen, but also to consumer demand for cars that are less expensive to run.
The same goes for energy-efficient appliances, "green" buildings, etc. They make people wealthier AND reduce their energy use. This is what I meant in the comment you quoted: prices prompt people to change to these products without anyone needing to force them to do it.
However, some people still choose to ride "gas guzzlers", because they can afford to. Maybe in future they won't, so they'll adapt their behaviour, as people naturally do in response to the "signals" that market prices provide (I've explained this earlier). You don't understand the role the market plays in influencing people's behaviour, and seem to prefer the big stick of the state.
Your tone is always arrogant and condescending. Unlike you, I don't presume to tell the other seven billion people in this world how to live their lives.
Kleefer - I didn'y start out either arrogant or condescending - but t'is true I've gone down that track over the last few years.
You need to do the math. Efficiencies do not outweigh overall usage. If you double the efficiency of vehicles, but produce twice as many, then - mileage being equal - you haven't gained anything in terms of husbanding the finite resource they burn.
Thirty years ago, I quietly debated, quietly researched, assumed to obvious would be apparent. We are out of time now, thirty years squandered building infrastructural monuments to ourselves - which I see as the true arrogance - as the foretold unfolded.
I suggest you spend half an hour on that, and take particular note of the 2nd graph down. They ran it with 'double resources', and it made hardly any difference.
The real arrogance - and the real condescention - is from those who believe that a totally artificial construct, incredibly short-term and one-species buy-in, is somehow superior to nature, physics, chemistry....... Or maybe it's more ignorance, I've always thought of the two as comfortable bed-fellows.
Yup, silly you :) It wasn't the science, that just applied the new-gotten compact, thousand-horsepower bang-for-buck fossil energy to - in the Malthus hypothesis - agriculture. Any idea how much energy is applied to agriculture daily?
"Fossil energy and technology enabled humans to (temporarily) sustain excesses. At present and projected world population levels, the current pattern of human development is not ecologically sustainable. The world economic system is built on depleting, as fast as possible, the very natural resources on which human survival depends.
Clearly, this is a flaw in human logic. Humans must learn how to manage natural resources in a sustainable manner and determine the number of humans compatible with an acceptable standard of living".
grow well, Skudiv :)
Not to mention penecillin. Totally agree on the current pattern of human development. I found it truely ironic that economics is "the study of meeting human wants and need with finite resources" yet the subject never really seems to deal with the fact that the resources will be gone. It seems to rate art and oil as finite resources and sees no need to treat them differently. They are both finite and valuable, but.......
You're taking a narrow view of the concept of substitution; perhaps I could illustrate.
There is no substitute for coal if what you want is something to feed into a coal-fired power station. If there is no coal, the power station will stop functioning. But there are substitute ways to generate electricity (including effectively infinite resources, but let's leave that aside for now).
There is no substitute for electricity if what you want is something to make your heat-pump pump heat. If there is no electricity, your heat-pump will not work. But there are substitute ways to heat up a room (including effectively infinite resources, but let's leave that aside as well).
There is no substitute for warming up your room if what you want is a warm room. If there is no way to heat up your room, your room will be cold. But there are substitute ways to get yourself warm.
There is no substitute for keeping yourself warm if what you want is to stay alive. If you are unable to go somewhere warm, take exercise, cuddle up to somebody else, wear more jumpers, your human ingenuity runs out and you are unable to think of anything else, then yes, you'll die of cold.
But this is not a reason for leaping straight from a shortage of coal to the conclusion that you're going to die of cold. As the above shows, there are plenty of alternative consequences to a shortage or complete absence of coal.
Now the above was all to do with physics and engineering, not economics. What economics adds to it is the proposition that in a free market, the interaction of supply, demand and price drives decisions about whether, when and what kind of substitutes will be sought for any given resource.
The counter-proposition of PDK and others seems to be that by central planning we can do a better job of that decision-making, a proposition for which there is as yet no empirical evidence.
MdM - that had little to do with physics, much to do with wishful thinking.
'Effectively infinite resources' is the humbug bit. I happen to be a champion of solar power, it being the only real renewable. I don't happen to be stupid, though. It has to be captured, thence transported by something, and that something unfortunately, has to be some form of conductor. We're back to finites.
The idea that a 'free market' has pre-emptive intelligence, is so disproven, so much of the time, for anyone who cares to look, that I won't go there. For starters, the Dow wouldn't move 1.5% in 24 hours, it it tracked reality - inertia would see to that.
And you mistake our line completely - if folk indeed were able to mass-anticipate powerdown, I'd be happy to leave 'em to their own devices. I don't give two figs about what style of leadership, or structure, does the job, just that it has to be done. You may see an invisible hand, I see an invisible brain.
If we were back about 1980, I'd say you had the time to let folk try. Now, we're out of time, and folk like you prove the understanding has not gotten through. No offence.
Didn't say that the free market has pre-emptive intelligence, but people do; and in a free market they have an incentive to use it. Of course it's messy, particularly if you assess its performance by such micro-detailed measures as the day-to-day performance of the Dow. Of course it involves individual mistakes and failures. But it's proved effective at matching overall demand and supply as no other style of leadership, or structure, has done.
If it is really the case that you have no ideas or opinions about alternative ways in which the future task of matching energy demand to energy supply (which I think is what you mean by "the job") is to be done, then what are we talking about? Is your position really that we are all doomed and there's nothing to be done about it?
PS: happy to withdraw the aside about effectively infinite resources. It wasn't important to the narrative, which is why I suggested leaving it aside. The point was to demonstrate that the concept of "substitute" is as wide as is human ingenuity, which is pretty wide.
However, it is certainly possible to reach the point in thought-experiment where economics has no answers and there is nothing for it but to give up, lie down and die of cold. But once we reach that point in the narrative above, physics has no answers and no means of saving skudiv from dying of cold either. Neither has engineering, socialism, Confucianism or the Flying Spaghetti Monster. So what?
MdM - there is a little thing called 'cognitive dissonance'. As I \'ve stated here before, my Physics Prof friend mentions it in one of his lectures. Many folk seem to be able to hold both 'unlimited substitution' with 'finite resources' simultaneously as if they are compatible concepts.
They're not.
Are we all doomed? Nup, if I thought that I'd not bother being here. But we will be if we carry on in this manner, and in fact it's too late to morph without some severe inconvenience.
Just remember that Runplestiltskin is a fairy-tale. You can't make basalt into copper, no matter how much energy you throw at it, and if you try that track, expect less energy for other things.
(including effectively infinite resources, but let's leave that aside as well).
You dont do engineering or physics or maths do you? no, not one bit.
Economics is a study of no reality......really......Where the free market falls flat is it only looks at the incredibly short term...so if energy is cheap today, do nothing......tomorrow do nothing....next year up 5%, do nothing......3 years up 20% think about doing something.....but the lead time for new oild fields is on average 8 years, nuclear powerplants ditto....given the curve Ive just described free markets have no hope in meeting our economic and energy needs 5 years out, none, nada.....
Central planning, no not central planning and ive not seen PDK a champion of it, in fact the reverse, localisation....do it for ourselves...now in terms of Policy, yes OK.....thats leadership......"we want to be here (points to chart) in 5 years" So sure set targets and penalities for failure because the failure coming if we do not will be un-forgiving.
regard
You clearly know nothing at all about the actual experience of the energy industry under market conditions. It is simply not true that market participants do not anticipate supply/demand-driven price rises, do not plan ahead and do not invest in new capacity until it's too late. Internationally, where there have been shortfalls in capacity, that has been because of Government/regulatory interference in the market distorting price signals and hence failing to incentivise demand or supply side responses. The most notable examples are perhaps South Africa and California.
I assure you - the "narrow view" belongs to the normative theory of neo-classical economics you're spouting on about. Expand your mind....
http://hpronline.org/harvard/in-defence-of-the-students-who-walked-out/
You are seriously deluded IMHO....Wealth/money is a proxy to buy a good, it is an IOU, a debt to be paid in the future...."Good" can be work or an object that took work to make. Work is energy.... So without more energy to under-write the money/wealth it is vapourware.
Market signals are a joke....the market is not rational or timely....
"Oil is cheaper relative to gold than it was 30 years ago, showing that most of the price increase has come from debasement of the currency rather than increased demand or reduced supply."
Pity that ppl like you wont be the only ones to suffer from such an outlook deivorced from all reality....then I'd be all for a bit libertarianism....
A classic example is time and scale that the market fails to see...If you have enough oil today its cheap, the fact that it takes 8 years to get more on line means that you get no signal until its too late, hence why we are at $120+USD and climbing...."oh god its expensive lets drill for more" so wait 8 years to get it....
regards
I totally agree with you on this. Every time I read "laissez faire economics" or "excessive free market capitalism of the last 30 years" I wonder just exactly where this has been taking place, because all I see is a lot of self interest by the financial sector (harly free market), excessive regulation on productive businesses and even more excessive walfarism. All encapsulated by huge amounts of debt.
In regards to companies can't force you to buy their products, there is a grey area that exists there in the case of things like housing. I can't choose not to either buy or rent a place to live. I have to buy one from somebody. While I'm not forced to buy from any individual company or person, I am forced to buy one from the group of house owners as a whole. And this group (along with banks and politicians) work together to drive house prices up. Here one group (the group of current owners of property) have benefited at the explicit loss of another group (the group of people who cannot currently afford to buy property - their rents also increase). But it wasn't the State that used this market force. I guess you could argue that the state was complicit vis a vis politicians supporting it, but they certainly were not the prime movers here.
It seems fairly clear to me that there are indeed entities other than the state with the power to use the market.
Anyone who takes cheap credit from banks for a mortgage is doing it. Banks control most of the supply of money and they lend more money more cheaply for real estate. Like I said, I agree that the govt is complicit but it's the bankers and real estate investors that are the drivers here.
Both parties CAN benefit from trade. There are never any guarantees that they will. Companies can force you to buy their products, if they are selling an essential product or service. In fact in bolivia free market capitalists purchased the only water company, made it illeagle to have an independant supply and made the price of water close to a days wages.
Capitalism does many things well, but in the areas where it fails, the fallout is massive. The state is an epic fail, but try not to get to caught up in some fairy tail vision of an unrealistic capitlalist utopia, because it doesn't exist.
When someone has no job, no home and no food and you offer him $2 a day, and this is his only option outside of crime (where he could protect his own right to eat, by shooting you and stealing your money). Then he accepts your $2per day, you may think are such a fair minded person by benefitting him with that exchange. In actual fact that is far more arrogant then any claims of excessive capitalism.
When someone has no job, no home and no food and you offer him $2 a day, and this is his only option outside of crime (where he could protect his own right to eat, by shooting you and stealing your money). Then he accepts your $2per day, you may think are such a fair minded person by benefitting him with that exchange. In actual fact that is far more arrogant then any claims of excessive capitalism.
Here's a piece I recommend you read to allay your concerns - http://mises.org/daily/5934/The-Irrelevance-of-Worker-Need-and-Employer…
Nice link from 90 at 9 from Ambrose on Spain.
Premier Mariano Rajoy has refused point blank to comply with the austerity demands of the European Commission and the European Council (hijacked by Merkozy).
Taking what he called a "sovereign decision", he simply announced that he intends to ignore the EU deficit target of 4.4pc of GDP for this year, setting his own target of 5.8pc instead (down from 8.5pc in 2011).
In the twenty years or so that I have been following EU affairs closely, I cannot remember such a bold and open act of defiance by any state. Usually such matters are fudged. Countries stretch the line, but do not actually cross it.
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100015432/s…
#1 - at least we don't have similar problems as Auz:
http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=10790034
"In an extraordinary public brawl, Treasurer Wayne Swan has taken on Australia's richest people, accusing them of excessive greed, ruthlessness and abuse of power."
"To be blunt, the rising power of vested interests is undermining our equality and threatening our democracy," he said.
"The infamous billionaires' protest against the mining tax would have been laughed out of town in the Australia I grew up in, and yet it received a wide and favourable reception two years ago.
"A handful of vested interests that have pocketed a disproportionate share of the nation's economic success now feel they have a right to shape Australia's future to satisfy their own self-interest."
I wonder where their $ would be if some of the mining revenue was going into a Norwegian style stabilisation fund?
Silly Auzzies, glad we don't have that kind of problem - 'Dutch Disease' ......
Gina Rinehart, Andrew "Twiggy" Forrest and Clive Palmer, between them worth more than A$30 billion ($36.85 billion).
The billionaires have shot back, describing Swan as an "intellectual pygmy" who does not understand the economy and who is trying to divide Australia by attacking success.
Gina Rinehart is right, she was successfully born into the Reinhart family, 'well done her' I say. Of course the fact that the whole lot was taken by force from the locals in the first place is never mentioned.
Yes the minerals one is tricky because, yes the entrepreneurs who organise to dig it up, process it and sell it deserve reward for meeting the market, but they did not create the minerals to begin with, so should some of the profits be appropriated via taxation and if so how much?
The other issue is can this tax revenue be used to maintain skills in the economy that might otherwise be lost ...
"The billionaires have shot back, describing Swan as an 'intellectual pygmy' who does not understand the economy and who is trying to divide Australia by attacking success."
This is rather laughable as it is pretty clear that the problem with Rudd's comments is that he understands the economy rather too well. If he understood less well he might be easily fooled into thinking that these 'wealth creators' are actually a benefit to Australia. I expect pygmy's understand reality much better than those three.
At least Warren Buffet is an honest billionare, there is a class war and the billionares are winning it quite convincingly. That will continue as long as the other side is waiting for the politicians to protect them, and not joining the debate.
Laughable considering its been that way for 30 odd years.....Paul Krugman doesnt call it the second gilded age for no reason.
Could be interesting of course.....the threats by the "right wingers" in here to bugger off to OZ would be somewhat empty.....whch is what Ive been saying....there will be no where to run to.
regards
US petrol prices up another 2% nationwide last week:
http://www.eia.gov/petroleum/gasdiesel/
Most everything in the US revolves around the car - from shopping to work to entertainment.
Interestingly Buffet's favorite marker for the US economy (freight car loadings) is now also starting to tip over:
http://www.moneyweek.com/news-and-charts/economics/us/us-economic-indic…
Its just like deja vu all over again! Or the same time last year........
Its not so much cars as also the distances and there is little choice....so PhilBest can watch with err glee as the suburbs of Huston he thinks will do so well etc implode.....
glad Im not there...
However its pretty hard in rural NZ to do much or go anywhere when there is no public transport alternative, its car, walk or pushbike...
regards
Brent is going for $124 and WTI $108....
just look at that trend line...ho hum....
regards
Fun Da Mental Flaws
"Inquiring minds are reading a 73 page detailed report The Netherlands & The Euro that explains country by country why Italy, Greece, Portugal, and Spain are going to need lots more money, and the Netherlands and Germany will end up footing the bill."
I cant see how they will agree to pay.....lets see "you want me, my children and grandchildren to pay huge tax bills for life because the Greeks/spanish/portugese/Italians/Irish spent it?"
Fat chance me thinks...just how the likes of SK, oily and bigdaddy think this will end well and wont effect us is mind boggling....
regards
the money is to keep the banks in business, they are the stupid/ really smart buggers who lent it. Why not let the market work and banks silly enough to lend to Greeks get to fail and the executive get to never get a job in banking ever again. Of course the real story is more like South American debt and US subprime etc. The executives get piad to write loans not get money back so they write loans until they go bad and are found out. Then they get to socialise the losses while haing already privatised the profits ( they get to book the whole potential profit they day they write the loan- fix that and you would fix a whole lot of things) We are alrady borrowing to pay off the whole SCF mess.
Any ChCh Red-Zoners out there, take heart:
http://www.stuff.co.nz/the-press/opinion/perspective/6528445/Selling-sections-at-a-reasonable-price
"With what the trust is doing, it begs at least this question - who else is prepared to offer sections in Christchurch for less than $120,000? One developer has told me that he has come out of retirement to help residents in the red zones. Good, now can he beat $120,000?"
Can CERA beat $120,000?
Re #2, the rise of the free economy, well worth a read, I love free stuff and great to see a counter force to decades of the relentless rise of the reverse - free stuff getting drawn into the monetary system: child care, excercise gyms, dog grooming, home maintenance, home cooking, entertainment, sport, clothes making, preserves, gardening, fishing quotas, water rights. What happened to the backyard boatbulders? Now they are making the very air we breathe a tradeable commodity.
How much of the rise in our GDP is down to this transition?
Yes, #2 is right on the ........money.
Telling it is, that Bernard is 'not sure he agrees". Folk like me have spent most of our lives realising that the unpaid/voluntary/barter/exchange approach would be inevitable. I guess we also anticipated the incumbent power-mongers attempting to disenfranchise others (as per the Nats currently - we're funding seismic surveys given free to offshore corporates, disenfranchising South Auckland from the dams they currently own). We also appreciated that the powermongers couldn't survive that way, and realised it's easier to let 'em go.
What I missed, was the inaction from the media. Guess I expected a Hersh or a Pearson to blow the whistle, all green shades, typewriter and honest indignation. What we get it total silence, and when prodded, more total silence. Where else could the debate be held?
Goebbels would have been proud.
But in many ways, that future is already here, and it can be described in five letters:
FARTS.
Read more: 5 Reasons The Future Will Be Ruled By B.S. | Cracked.com http://www.cracked.com/article_18817_5-reasons-future-will-be-ruled-by-b.s..html#ixzz1oJHesr8c
So why the hell do the mothers feed their infants poison formula when they can just produce milk, for free, from their own bodies?
A mother has to be adequately, if not well nourished herself to produce the volume of milk required to sustain life. And on top of that, stress arising from hardship further complicates matters.
Best not to refer to it as the "free economy" - as the "free" word is already taken by capitalism and it's "free" market. Better to refer to it as an "open source" or peer-to-peer economy - although I haven't read much beyond that article and this Wiki entry;
http://en.wikipedia.org/wiki/Michel_Bauwens
But the theoretical premise as a future pointer is very compelling - particularly if you have read Marx's historical critique of capitalism. Well worth further investigation.
Odd, I thought, the media stable the article appears in!
FYI RBA has held at 4.25% and seems to have retained its easing bias.
Details here.
http://www.rba.gov.au/media-releases/2012/mr-12-04.html
With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy remained appropriate for the moment. Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy.
Growth? Here's someone who knows where it goes. Wonder if anyone from the RBA reads it?
http://www.transitionus.org/blog/debt-and-transition-economy
"Inserting interest expenses into the community sets in motion a long chain of monetizing transactions which previously did not need to be monetized, thus creating greater financial need within surrounding local community members. “The goal of paying interest or dividends to investors, to give them a positive rate of return, conflicts with the goal that makes the company socially or environmentally ‘conscious.’”
Growth. An ugly and bullying term, dumped on the world at a time when the world,was going through an ugly and bullying time.
This country, like many others, is in effect many communities, that we can for simplicity and expedience aggregate. Two speed economy and all. The transition movement, in my opinion, has much insight and front foot forward going for it. Localise, look after the young (and old) in your street, work towards resilience for you and your neighbours, all good. That being said, does 1% more houses with vege gardens undermine the supermarket in your neighbourhood. No, would not think so. How about 100% home vege gardens, probably. But if we eat the same number of veges, how has national output changed. I would say it has not. GDP does not always reflect output let alone community externalities, hence interest.
Cheers
HUSSMAN: It Is Now One Of The Worst Times To Invest In History
Read more: http://www.businessinsider.com/blackboard/john-hussman#ixzz1oJB7zi3e
Without a doubt, at least in the last 200 years.....if you consider ERORI, (energy return on energy invested) as the investment game at its lowest, fundimental level (and it is) then watching the return drop from 100 to 1 to 30 to 1 was a concern, 6 to 1 is really the end. Thats where we are at....When we now see energy companies like shell going for 6 to1 or worse in the tar sands you know its pretty near to the end...So all "higher" forms of investment are about using money to extract/make something, move it and sell it at a profit. When we see that 95% of the population have not really gained anything from "capitalism" in the last 20 years then its really saying we are robbing 95 Peters to pay 5 (or even 1) Pauls....because everything else easier has been taken already....
Hence speculation on asset prices, property gambling, financial instruments etc, these are not productive endevours, in fact the reverse....I suspect they are damaging....
But expect it to continue....though there are signs the Pollies are changing coats.....the "rich" look to be hung out to dry soon and they have no where to run.
regards
Maybe this.
We dont pay to develop it, or even pay for the servers we can download it from. It's a community thing and I have more money to spend at the local greengrocers.
Is value the sum of future cashflows? What we can flog it off for in pieces or all at once, sometime in the future? What IRR locally, for Linux. And how can we account for the cost reduction, import$ reduction, in our National accounts?
Is their an Open Source multiplier? Probably. However, value, future cashflow, as a result of the community effort, if it never intends to be sold?
Cheers
It is an intriguing question that deserves a bit of time to contemplate, well at least more than can be reasonably applied at this time of night:-) I don't know about multiplier, but there is certainly value to the user.
You could open this up further to point to the weakness of the capitalist system, one where product is only as good so as the maker can make a profit from it........
Had a talk to a friend in the roading business, things are tough. Higgins in Napier laid off 40 workers today. He said there is no work and any tenders are too competitive, so they make no money anyway. Before the election there was road works everywhere now there is nothing, around here anyway.
They do that to my footpath/road crossing, I had patched the original bit and it was fine, but they insisted on replacing a long strip..........When I extended my drive I had to use 75mm+ of re-inforced concrete....they used 20~30mm of hotmix.....its been repaired every year since....like duh....I complain and they say they need to "offer value to rate payers"....so 20mm per year for 5 years is 100mm plus 5 lots of labour....or do 100mm at once and one lot of labour....would last 20 years+...like duh....
When I get a bit of time I'll do it myself properly....of course I will then be expected to do a building consent and it will have to be inspected I am sure at $100 a visit, probably need 2 visits minimum....bugger that....
regards
Here is a good link to include in tomorrows top 10 BH
Banker left speechless by Irish journalist
http://www.youtube.com/watch?v=pCHu1kRT6hU&feature=related
I wonder if anyone can actually give a good answer his question...?
Well steven, I'm sure there is an answer for everything somewhere...
http://www.youtube.com/watch?v=6dg_RSk2wyw&feature=channel_video_title
Well I wonder if it has anything to do with the trillions in off balance sheet derivative bets leveraged up without limit through the City of London (which doesn't regulate it) not going the bankers way then? (meaning for every $ of actual loss incurred the effect is many multiples as the underlying financial asset is leveraged up many times over).... that would also explain why some big banks don't mark to market (because they can't without imploding the system) and why the FED needed to give 16 trillion in interest free loans to its buddies... and why the entire global financial system is probably broken by the shaddow banking system which has probably wrecked it way beyond repair.... in which case the final outcome is already a foregone conclusion and all the economic policy one can come up with won't make any difference as many trillions in losses are yet to 'appear'... that would also explain why some large mega banks have been so desperately manipulating the LIBOR too... (charges pending as I right this)...would also in part explain why the CDS on Greece are trying to set a precedent that a volunteer default is not a 'real default' and therefore no trigger on CDS - which the same banks (CoL, Wall Street) are holding... oh dear, time will tell....
OK, no answer anyone want to give / receive in this case.
;]
The real answer is Ireland and its ppl is buggered for generations....they should have done an Iceland. His answer would be "sorry we are going to rape you and your kids and grandkids incomes for decades to pay for others mistakes" would have caused a riot there and then.
Reality is I think large scale world wide riots are comng....
regards
I think Ireland will tire of it (as will everyone else) and just default in the end anyway (as will Greece and dozens of others)... the thing is no one knows the eefct of a disorderly default as no one knows exactly how many CDS and other OTC derivative products are out there, I suspect the losses will be multiples of the initial default amount... but who know for sure...? That was the point in my previous post.
Well we certainly agree about the huge riots coming... mobs of tens of thousands that the police or national guard or whoever can't stop....
I'm not sure though about a 'world wide riot' - maybe the Pacific or Alantic oceans will put a stop to that, 'maybe major city wide'... :-), ah, to be in a lifestyle block in the country...., or at least at the edge of the city....
Hi Bernard
Sorry to sound like a broken record but would you please consider (again) instituting a 'thumbs down' option? I think that maybe you will have less need to edit comments when your readers feel they have a more immediate method of venting. Also, 'Crap Comment of the Day' as voted by readers might inject a little humour to our fiscally constrained lives! The ability to see numbers disagreeing strongly with a comment would allow more insight for those like me who enjoy gauging the mood out there.
Regards
Haggis
What would it prove? apart from a bit of anon bullying? that you have like minded mates who dont like a particular post?
Crap? or a good, sound post that say the libertarians in here dont like?
Simple write a reply, if its got agreement you get a thumbs ups, and the original poster has a right of reply....or maybe you cant cope with that?
regards
Hi Steven
It wouldn't prove a thing but it would definitely give a better idea of how people were thinking. I think the term 'bullying' is a little strong for a thumbs down. Most people here have pretty thick skins and from what I can see from some of the comments, many have no problem with personal abuse of others via the comment stream, anyway. I don't always have time to formulate a comment but often feel I would like to give my input if only to balance the thumbs up. Having thumbs up and no thumbs down seems a little too politically correct for me but I do apologise for suggesting Crap Comment of the Day...it was probably a step too far.
Steven
It's OK to insist on rationality, as long as you apply it to your own train of thought. I like the idea of thumbs up, but I don't feel the need to hear everyone's detailed reason for giving it a thumbs up. I just assume that there is enough in the posted comment for the reader to approve or lend their support to some or all of it. I hold to my view that adding a thumbs down would add interest and activity to this (already) great site. I'm sorry you disagree but it's not that big a deal.
Haggis
G
Greek 1-Year Bond Yield Hits 1,006%
http://globaleconomicanalysis.blogspot.co.nz/2012/03/greek-1-year-bond-yield-hits-1006.html
hahahahaha....that means almost a complete return on your money every month, so a default inside of 6 weeks seems the consenus...this should be post of the day! Actually I think its 1066%....not that 60% makes much odds v 1000% anyway...
So the only buyer is going to be the ECB....who wont take a haircut......can kicking cant go much further...
regards
Nothing to see here...move along now,,,harrrrrrrrrrrrrrhaaaahaaaaahaaa
"Stock markets slide on worries over slowing growth in China and Europe, amid increasing tensions in the eurozone in Spain and the Netherlands and a warning that a disorderly Greek default will cost the eurozone €1trillion."
http://www.telegraph.co.uk/finance/debt-crisis-live/9125198/Debt-crisis-live.html
"Greece has threatened to default on any of its bondholders who do not take part in this week’s €206bn debt restructuring, raising the pressure on potential holdouts.
The Greek public debt management agency said in a statement that Athens “does not contemplate the availability of funds to make payments to private sector creditors that decline to participate”.
The threat is aimed in particular at the 14 per cent of investors who own Greek bonds issued under international law. The remaining 86 per cent, who own bonds covered by Greek law, were warned in the same statement that Greece would use so-called collective action clauses to make any deal binding on any holdouts.
Such a move would almost certainly trigger credit default swaps, something that made many European policymakers very nervous until recently."
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